30 September 2008 09:52
Australian stocks wiped more than $50 billion off the value of the market today after lawmakers in the US House of Representatives rejected the US$700 billion bailout designed to rescue the American financial system. It was to be the biggest government intervention in the economy since the Great Depression in 1929.
The result was 205 - 228 against the bailout, with both Republicans and Democrats blaming each other for the loss. The shocking turn of events came after politicians believed they had agreed on Sunday on the details of the rescue plan and that they would get the support of the House of Representatives. Once the vote was lost, the Dow Jones plunged 777 points - the worst single-day point loss ever - wiping out almost US$1.2 trillion in market value.
President Bush was "very disappointed" with the outcome, Barack Obama blasted Congress for not passing the plan and John McCain accused Obama and the Democrats of putting "politics ahead of country."
The plan would have authorised the government to purchase bad debts from financial institutions, thus allowing banks to recommence lending to enable now-frozen credit markets to resume operations.
Prime Minister Kevin Rudd said he had spoken to British Prime Minister Gordon Brown this morning.
"We are now in touch with all of our counterparts in the United States from the Australian point of view, a British point of view and the Europeans are doing the same," Mr Rudd said today.
"There's no doubt that events in the United States will probably put further upward pressure on borrowings but we'll just have to wait and see," Treasurer Wayne Swan said today.
Source: cnn.com; smh.com.au